Correlation Between Ebara and NETGEAR

Can any of the company-specific risk be diversified away by investing in both Ebara and NETGEAR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ebara and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ebara and NETGEAR, you can compare the effects of market volatilities on Ebara and NETGEAR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ebara with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebara and NETGEAR.

Diversification Opportunities for Ebara and NETGEAR

0.0

Correlation Coefficient

Ebara  NETGEAR

Pay attention - limited upside

The 3 months correlation between Ebara and NETGEAR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ebara and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Ebara is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ebara are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Ebara i.e., Ebara and NETGEAR go up and down completely randomly.

Pair Corralation between Ebara and NETGEAR

Assuming the 90 days horizon Ebara is expected to generate 21.09 times more return on investment than NETGEAR. However, Ebara is 21.09 times more volatile than NETGEAR. It trades about 0.11 of its potential returns per unit of risk. NETGEAR is currently generating about 0.04 per unit of risk. If you would invest  3,530  in Ebara on September 28, 2024 and sell it today you would lose (2,330) from holding Ebara or give up 66.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	64.89%
Values	Daily Returns

Ebara  vs.  NETGEAR

Ebara

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ebara has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ebara is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ebara and NETGEAR

The main advantage of trading using opposite Ebara and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebara position performs unexpectedly, NETGEAR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NETGEAR will offset losses from the drop in NETGEAR's long position.

The idea behind Ebara and NETGEAR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.